On April 29, 2009, the European Commission published the text of its proposed Alternative Investment Fund Managers (AIFM) Directive as part of the Commission’s wider strategy to reduce systemic risk to the economy, and to strengthen transparency and harmonisation of applicable laws for hedge and private equity funds. This is the first attempt in any jurisdiction to control the management of AIFs, the Directive’s definition of which also includes commodity, real estate and infrastructure funds. The draft is now being considered by the European Parliament and Council and could be in force in Member States in 2012. It is clear that certain aspects of the Directive, such as transparency for investors and some limits on leverage, are to be welcomed. Indeed some provisions like increased disclosure are already UK industry practice. Other provisions in the draft, however, are of genuine concern to the hedge fund industry. In a guest article, Davina Garrod and Lawrence Grabau, Partner and Trainee Solicitor, respectively, in the London office of McDermott Will & Emery UK LLP, offer a detailed discussion of those more disquieting provisions, and provide a summary of the complex process for adoption of the Directive.